Racial disparities in federal disability benefits

Contemporary Economic Policy, Jan, 2007 by Erin M. Godtland, Michele Grgich, Carol Dawn Petersen, Douglas M. Sloane, Ann T. Walker

We also controlled for factors that represent participants in the decision-making process. These variables include whether the claimant was represented by an attorney; whether they were represented by a non-attorney, such as a relative, legal aid, or friend; whether a medical and/or vocational expert testified at the hearing; whether a translator attended the hearing; and whether the claimant attended the hearing. To our knowledge, such variables were not available in prior attempts to model this process.

We also controlled for several factors that should not be part of the decision-making process (i.e., they are neither criteria nor participants in the hearing), but which have been found by past research to be significant predictors of disability decisions. Specifically, we controlled for claim type, which indicates whether a claimant has applied for SSI, DI, or both SSI and DI (concurrent). Hu et al. (2001) found that DI and concurrent claimants are more likely to be passed on at Step 2 of the disability decision-making process than applicants for SSI and posit that SSI applicants have lower opportunity costs of applying and will therefore apply with less severe impairments. (9) We also included a control for the year of the hearing decision, which might capture changes in decision making that have occurred over time due to changes in national policy or in the economic health of the country. Kreider and Riphahn (2000) found that year of application has a significant impact on the probability of being awarded benefits at the appellate level. We also controlled for the SSA region in which the decision was made to capture potential regional differences in culture, social norms, court decisions, or geographic variation in SSA's practices. Hu et al. found evidence that award rates at the initial level differed significantly by region at Steps 2 and 4 of the disability decision-making process. Finally, we controlled for sex and race, which, although not part of the ALJ decision-making process, have been found by past research to be significantly related to disability awards. In particular, a prior GAO report found significant differences in award decisions at the initial level by sex and race. (10) Hu et al. also found that women and young African-Americans are more likely to be rejected at Step 2 of the decision-making process, and Baldwin (1997) finds that women, particularly those over 55, are more likely to be rejected at the initial level on the basis of vocational criteria.

To help control for the propensity to apply for benefits, we included a variable for earnings in our model. Specifically, the variable was constructed by taking an average of employment income earned by the claimant during the 5 yrs before the hearing decision. While this variable does not necessarily reflect the claimant's total household income, because it does not include spousal or investment income, it does reflect the opportunity cost the claimant faces in leaving the workforce. Past research has found that, holding all else constant, claimants with higher earnings potential will be less likely to apply for disability benefits. (11) While we would have liked to control for other factors that might also influence an individual's likelihood to apply for benefits, such as family size, marital status, and asset holdings, such information was not included in our data and could not be obtained from SSA. (12)